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Mortgage

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The average rate for a 30-year fixed mortgage was 3.07%, down from 3.13% last week, Freddie Mac says

Mortgage rates dropped to a new all-time low in the U.S. this week as a resurgence of COVID-19 infections caused investors to pile into the bond markets.

The average rate for a 30-year fixed mortgage was 3.07%, the lowest in a data series that goes back to 1971, and down from 3.13% last week, Freddie Mac said on Thursday. The average 15-year rate fell to a seven-year low of 2.56%, according to the mortgage financier.

Bond yields, used as a benchmark by mortgage investors, have fallen to near-record lows over the last week on news of a resurgence in COVID-19 infections, erasing hopes for a V-shaped recovery that would have the economy rebounding quickly from the virus-induced recession. States including Texas, California and New York have either paused reopening plans or reversed course to stem the spread of COVID-19.

“The spread of the virus is worsening in almost every state,” Goldman Sachs economists said on Tuesday. “Over half of the US has now reversed or placed reopening on hold.”

The number of confirmed new COVID-19 cases in the U.S. reached a record 52,789 on Wednesday, the day after White House pandemic advisor Anthony Fauci, told Congress the nation could soon see more than 100,000 a day.

“I can’t make an accurate prediction, but it is going to be very disturbing, I will guarantee you that, because when you have an outbreak in one part of the country, even though in other parts of the country they are doing well, they are vulnerable,” Fauci told the Senate Committee on Health, Education, Labor, and Pensions on Tuesday.

Concern about a resurgence in COVID-19 infections have spooked financial markets and sent investors to seek the perceived safety of the bond markets. Market watchers call that dynamic a “flight to safety.”

Almost all U.S. mortgages are packaged into fixed assets and sold to investors, who are the ones that ultimately set mortgage rates by deciding what returns they are willing to accept, known as the “yield.”

“The concern about a coronavirus resurgence did take the wind out of the sale of equities and money did flow into bonds in the last few days,” said Keith Gumbinger, a vice president at HSH.com. “That pressured bond yields down a little bit – they didn’t plummet, but they fell enough to have the rate measured in the Freddie Mac series set a new record low.”

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